Remove non taxable Fellowship Income from NJ state tax income

[gman0105]

I have income from a university fellowship that is reported on my Federal Tax as "Other Reportable Income".  New Jersey State does not tax this fellowship.  In past years TurboTax State - New Jersey had a column in the "Other Non-Wage Income" section to input how much of this income was "Attributable to NJ".  That column no longer exists in the 2025 version. 

So , now how do I remove this portion of my income from what is taxed in NJ.   

[DaveF1006]

The most reliable way to remove this income in the current software version is to enter a manual adjustment in the Other Non-Wage Income section.

1. Go to the State Taxes tab and begin (or "Update") your New Jersey return.
2. Continue through the interview until you reach the screen titled "Any Other Non-Wage Income?" (This is usually right after the interest/dividend screens).
3. Enter "Exempt University Fellowship" (or "Fellowship reported on Federal return")
4. Description: "Exempt University Fellowship" (or "Fellowship reported on Federal return")
5. Amount: Enter the amount as a negative number (e.g., -5,000).

This will create a subtraction on your NJ-1040, Line 26 (Other Income), effectively canceling out the fellowship income that TurboTax automatically pulled from your Federal 1040.

[gman0105]

Thank you @DaveF1006 , 

Your suggestion works in execution, but when I completed the return Turbo Tax states that "Returns with a negative amount on Other Income are not eligible for electronic filing".

Is there another method?

It's disappointing that Turbo Tax made this change, it was much simpler (and clearer) to have the ability to mark the income as Not Attributable to NJ.

[AmyC]

I would file the federal return. Save a copy. Then change it on the federal side so you don't have the subtraction on the state side. The point is to have the correct taxable income. File the state return.

Keep track of your records and why you did that along with this thread where you can show good faith effort and trusted the advice of professionals. 

[gman0105]

Thank you @AmyC .  I understand your logic, but would this method be acceptable if audited by the IRS/NJ IRS?

[AmyC]

Yes. Both the federal and state would be accurate filings. When audited, they are looking for under-reporting of taxes, illegal activities, etc. You filing your returns to be accurate, not a worry. You also have this thread showing you acted in good faith and relied on professionals. You can save a pdf of this thread to add to your tax records.

In addition, let the developers know.

Once you file your return, as long as the settings to receive communication from Intuit don’t block it, you will see a pop-up message or receive an email with a survey asking you about your experience. We encourage you to leave your notes and comments there. “Voice of the Customer” notes and comments are read and acted upon. 

If you are using TurboTax Desktop, you can also leave feedback at the Final Steps tab.

[gman0105]

Thank You!